Friday, February 22, 2013

US Food Aid Reform is Long Overdue

There are rumors that U.S. food aid programs could see major
changes in the next budget, including converting some of the Food for Peace
program into straight cash grants instead of in-kind food assistance. Two independent task forces convened by
The Chicago Council on Global Affairs have recommended changes in this
direction for several years. The task forces found that a move to a cash-based
food aid system that serves the same number of people food aid does now would
actually make US food aid more effective and efficient, advancing the US
reputation as the world’s largest donor of food aid to help hungry people.

US food aid would be more efficient and cost effective if
the US transitioned to a more cash-based food aid system except in certain
emergency situations in which a food donation is required. A cash-based food aid system is a speedier
and more cost-efficient way to reach beneficiaries in developing countries than
shipping U.S.-grown food to low-income countries. Cash can also be distributed
rapidly even to remote locations.
Local and regional purchases of food aid reduce delivery time by an
average of 13.8 weeks, or by more than half the current delivery method, while stimulating agricultural development. The transaction costs of a cash-based system are also lower
than shipping food aid. According
to the FAO, approximately one-third of the total funds allocated for emergency
food aid is spent on transportation costs. Moreover, a cash-based system will allow local and regional
purchases of food and stimulate local markets without artificially lowering
prices.

The United States is the only aid donor that still gives food in-kind rather than cash. Donation of U.S.-purchased food aid should
continue only when local supplies are inadequate or nutritionally dense foods
are not readily available. These
instances could include donations to refugee camps in famine areas or aid
following natural disasters.

Scale down the monetization of food aid

Both task forces also recommended that the United States
should scale down the practice of monetization. The loss to taxpayers is huge considering the overhead
costs, and the practice contradicts efforts to eliminate wasteful government
spending. The 2011 GAO report on
reducing duplication in government programs and saving tax dollars found that
the process of using cash to procure, ship, and sell commodities costs $219
million out of total budget of $722 million over a three-year period. Almost 30 percent of the funds
appropriated for development projects did not reach intended recipients due to
the monetization process.
The GAO report concludes that monetization “cannot be as efficient as a
standard development program which provides cash grants directly to
implementing partners.”
Additionally, the sale of U.S. goods can drive down local market prices
and discourage local food production. Groups recommended that the US government transfer
funds directly to nongovernmental organizations to conduct their development
programs overseas.

About the task forces

The 2012 US Agriculture and Food Policy
Panel was a bi-partisan task force led by Catherine Bertini, former executive
director, UN World Food Program; August Schumacher Jr., former undersecretary
of Agriculture for Farm and Foreign Agricultural Services, US Department of
Agriculture; and Robert L. Thompson, professor emeritus of Agricultural Policy,
University of Illinois at Urbana-Champaign. The panel’s final statement, released in June 2012,
included recommendations for how to modernize US food and farm policy to meet
the production, nutrition, and environmental challenges of the future.

The 2009 Global Agricultural Development
Leaders Group was a bi-partisan task force led by Catherine Bertini and Dan Glickman,
former secretary, US Department of Agriculture. The group released recommendations in February 2009 laying
out the opportunities and benefits of greater US investment in agricultural
development in Africa and South Asia as a means to alleviate global poverty and
hunger and increase global food production.

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